3 Myths About Saving for Retirement

Unfortunately, there’s a lot of confusion surrounding the topic of
saving for retirement. You’d think it’d be something we learn about in school,
but most of us just gather bits and pieces of knowledge from parents,
coworkers, relatives, or friends. Although almost everyone knows that saving
for retirement is important, many people don’t have their facts straight.

Today, I want to break down three of the most common myths about
saving for retirement. As a society, we need to do better about educating young
people (and old people) about the value of saving early and saving correctly.

Myth #1: It’s Not Worth Saving If You Make Less Than $20/Hour

I can’t count the number of people who’ve told me that they aren’t
going to save money for retirement until they’re making at least $20 an hour at
a full-time job. So many people graduate from college and start a part-time gig
that doesn’t pay well, and as a result, they assume that they’re not ready to
save for retirement.

That’s simply not true. The earlier you start saving for
retirement, the better, no matter how much money you make. Think about it this
way. If you saved just $1,000 a year for retirement (about $83 a month) for
three years after college, that money could be worth over $70 grand by the time
you retire!

Every little contribution counts, so start now regardless of how
high or low your salary is. Don’t wait until it’s comfortable to start saving.
Trust me, the sacrifice will be worth it in the years to come.

Myth #2: You Can Only Save If Your Job Offers a 401K

Many people don’t even contemplate the idea of saving for
retirement until they see a 401K listed in one of their job benefits. In truth,
you can start saving for retirement much sooner, with or without a full-time
job.

Even if you don’t have access to an employer provided 401K, you can
open an IRA with a bank and begin socking away money for the future. You won’t
get a company match, but you’ll get the same tax benefits and compound
interest. You are never too young to start saving; I’d even recommend beginning
your contributions at age 18. It’s not difficult to open an account, and you
can easily learn to invest with something like the Couch Potato Method.

Myth #3: I Need a Million Dollars to Retire

Oh boy, don’t we wish this one was true. Reaching a million dollars
in your 401K or IRA isn’t the end-all-be-all of retirement saving. At one point
in time, a million could take you a long way after you quit working. Now, that
isn’t necessarily true. People are living longer and inflation is changing the
value of our dollar.

Experts estimate that depending on when you retire, you likely need
10 to 12 times the amount of your current income. That means that if you and
your partner are used to living on $150K a year, you’ll likely want to have
$1.5 million or more in the bank before you retire.

If you’re worried that you’re not aiming to save enough, reach out
to a financial expert for advice. Don’t just assume that achieving the
“millionaire” status will mean you can lead a cushy life once you stop working
full-time.

In Conclusion

Don’t believe everything other people tell you about saving for
retirement (including me!). Do your own research. Make your own calculations.
Whatever you do, don’t leave the task until your 30s or 40s. The earlier you
can start, the less you’ll have to worry when you’re old and gray.